U.S. Justice Department attorney Brett Shumate defended a 10 percent global import tax imposed by the Trump administration in U.S. Court of International Trade Friday.
Shumate argued that Section 122 of the Trade Act of 1974 granted President Donald Trump the power to levy tariffs during a J"large and serious" balance of payments deficit.
“He has a mandatory obligation to impose the special import restrictions if he makes the finding that there is a large and serious balance,” Schumate told the three-judge panel.
The April 10 oral arguments stemmed from two small businesses suing the Trump administration to invalidate the new tariffs, which went into effect Feb. 24.
On Feb. 20, the U.S. Supreme Court ruled 6-3 in Learning Resources Inc. v. Trump that the president lacks the authority to impose tariffs under International Emergency Economic Powers Act (IEEPA).
The IEEPA is a 1977 federal law that grants president of the United States general authority to regulate economic transactions during a declared national emergency.
The U.S. Supreme Court ruling ended Trump’s justification that the fentanyl and narcotics crisis, the trade deficit and trade fairness qualify as national emergencies.
"The President invoked Section 122 to address trade deficits," Shumate said. "After this court faulted the invocation of IEEPA, the President turned to his clear statutory authority."
Section 122 dates back to financial crises from the 1960s and 1970s. At that time, the U.S. dollar was linked to gold.
Underlying the issue is the language covering trade deficits, the difference between what countries buy from the U.S. and what the U.S. buys from them.
In response to Schumate's argument, one of the judges questioned whether a "trade deficit" is the same as "balance of payments," which is based on a fundamental principle of international economics known as the Balance of Payments Identity in which the balance of payments "always nets to zero."
Schumate said that looking to a summation does not make economic sense because the accounts "always comes out to zero" and he pointed to the structural interpretation of the plural word "deficits."
“There can be multiple deficits within the balance of payments because there are multiple accounts,” he said. “The statute does leave to the President's discretion to make a finding about large and serious deficits. It doesn't just say deficits…you may always have a deficit in one of the accounts, but you're not always going to have a large and serious deficit.”